Business Services

Professional/Technical Contract Policy

Professional/technical contracts are to be used when people are to perform a task(s). These contracts are predominately “intellectual” in character, and may include consultation, analysis, evaluation, prediction, planning, or recommendation of policies or courses of action, and usually require the production of a report or result in the completion of a task. These contracts are also used for speakers and entertainers.

Overview and Helpful Hints for Smoother Processing

Questions regarding payments to Minnesota State University employees for work outside their normal duties should be directed to Human Resources. For payments to other MnSCU institutions for their employees to teach a course or guest lecture for Minnesota State University Moorhead, contact Human Resources. A purchase order is required for this expenditure.

Questions for payments to all other State employees (excluding University of Minnesota employees), should be directed to Human Resources. A purchase order is not required in this case. Payments to students enrolled in 6 or more credits should be processed through student payroll.

Contracts over $50,000 require a formal bidding process.

Contracts over $100,000 require approval from the Minnesota State Colleges and Universities Vice Chancellor of Finance. Certificate of Compliance is required.

Contract Signatures: Persons signing contracts must have prior delegation of authority from the current University’s President. This delegation is held by most Deans and VP’s who are authorized for various dollar thresholds. If unsure who should be signing contracts for your college, please contact the appropriate Dean’s Office.

Contract Forms: It is best to avoid saving copies of the contract documents as they change along with any MnSCU and/or state regulations, statue changes, etc… In order to avoid contract forms from being rejected, please always start directly from the following link for the most current document version.

External Reviewers – People from outside the University who have knowledge of what accreditation companies are looking for or have been through the accreditation process previously. They are hired to come in and work with the department and make suggestions. Contracts are required in order to process payments to these individuals. Their travel costs can be incorporated into the contract as an all-inclusive payment or separated out. If separated, it would require paid in full, itemized, original receipts and mileage documentation attached and submitted along with the Professional/Technical Contract Expense Reimbursement/Invoice for payment.

Data Disclosure (Page 1) of the Contract: Be sure when contracting with an individual that they are answering the questions and initialing in the box on this page.

Contractor’s reimbursable expenses: If paying for a contractor’s expenses/travel, the amount must either be included in the contract as all-inclusive or be separated out within the contract. If separated out, the contract should state that payment will be sent to contractor within 30 days of receiving an itemized invoice with all original itemized receipts attached. In this case, it is good practice to send a cover letter along with the contract so the contractor is fully aware of the need for original itemized receipts and itemized invoicing. In addition, this is also a good time to explain the need to expedite the paperwork back to the university in a timely manner, etc. Bringing the contract with them to the event leaves little time for fully executing the contract and could result in a 16A violation.

Contractor’s expenses cannot be directly charged to the University and paid for directly with University funds or paid for by a University employee who would then request to be reimbursed. The state is prohibited from paying third party expenses and/or paying in advance. This includes but is not limited to the following:airfare, lodging, meals, rental car, taxi, mileagethe use of state vehicles to provide contractor’s ground transportation donations or thank you gestures in paying for contractor’s meal and then requesting to be reimbursed for itany supply or material expenses associated with contractor’s visit

Terms of Payment (Page 3): By statute the state has 30 days from the invoice date to make payment. Clearly state what is expected of the contractor in order for them to be paid. If the contract is for one payment and does not have expenses separated out, it could be stated that payment will be processed within 30 days of receipt of an invoice. Or, if preferred, an authorization form can be printed at the time the contract is fully executed. It will be sent to the department responsible person who will hold onto the form until after the event takes place. Once the duties are completed, the form is signed and sent to accounts payable for processing. Note: Once the purchase order is at 450 processes, the system will not allow the printing of the authorization form.

Contracts with multiple payments: contractors are expected and should be told to keep track of their hours and/or reimbursable expenses they have incurred as they will not be paid any amount beyond what was agreed to in the contract. If changes need to be made, both parties must agree to them by entering into a fully executed contract amendment prior to the exhaustion of funds or expiration of the original contract. Multiple payments should be based on a set of duties, phases of work, etc… and should not be set up as a payroll check (every two weeks), etc…

Foreign Contracts

The IRS requires 30% federal income tax withholding on compensation paid to a “foreign national”, which includes a foreign corporation, foreign partnership, foreign trust, foreign estate and/or any other person who is not a U.S. citizen. This is required unless the amounts are either exempt under the terms of a tax treaty, or exempt from tax under the Internal Revenue Code.

We must secure prior approval from MnSCU before hiring a non-citizen of the United States.

The individual must have an ITIN (Individual Tax Identification Number) before they can be paid. If they do not have an ITIN, they will need time to apply for one through the Federal System. The individual must complete and sign the MnSCU “Vendor Tax Residency Information Form”, Form W-8BEN and the “B Honoraria Eligibility Certification Form”. These forms must be approved by MnSCU to check tax treaty status, etc… before the contract is offered to the individual.

Exception: If we are paying for travel reimbursement only and the individual holds a B1 or B2 visa we do not have to collect any forms other than copies of the visa/immigration status, they do not need to have an ITIN and we do not withhold 30%.

Note: You can access the IRS direction for forms and/or instructions at http://www.irs.gov/publications/p515/index.html

It is in everyone’s best interest to start early in your contract process. Be sure to let those in your office who do the paperwork and deal with the payment to know early in advance when working with someone outside the country so there is time to build a successful contract. Do not make verbal promises that you may not be able to keep.

If there are any questions or concerns, please call x2222.

Procedure and Helpful Hints for Foreign Contracts

First and foremost, the more lead time allowed and the more information given can be crucial to having a seamless contract situation for all parties involved. Many times it can take a while to nail down the specifics, get forms back and forth, etc… for contracts with foreign vendors. Be aware additional forms may be requested on an as needed basis as you go through the process. Rarely will we have all the answers at once because decisions are based upon the information received at the time it is received.

In order to determine what tax forms will be needed prior to requesting a vendor number and offering a contract, complete and return the Foreign Vendor Preparation Worksheet. Once this completed form is submitted, MnSCU tax services will be contacted for direction. As soon as we hear back, additional instructions on how to proceed will be emailed.

There needs to be a contract done regardless of the dollar amount because we are dealing with a non-resident alien vendor which may be subject to 30% withholding and possibly another 2% for non-resident entertainer tax if there will be people in attendance other than MSUM students and/or employees.

All-inclusive contracts are always the easiest but not always wanted by the contractor. It all depends upon how they take care of their tax issues. In addition, as I mentioned, if people other than MSUM employees will be present (open to the public) we will need to withhold the 2%, that comes off of the gross amount paid even if he has an SSN.

That said all expenses must be paid for by the contractor for which they will request and receive reimbursement in accordance with the current Commissioner’s Plan. Original, itemized receipts are required to be stapled to the back of the contractor’s signed invoice using the above attached form, named “Itemized List of Contractor Expenses”.

Please know that any meals, lodging, and ground travel are the responsibility of the contractor. We cannot reimburse anyone else or pay for any of these items out of departmental, foundation, student fees, agency accounts or otherwise. Faculty and/or staff cannot pick up this person, then claim mileage or other expenses due to this person’s visit. In addition, the university cannot be direct billed by a third party vendor for anything in connection with your contractor. All expenses need to be accounted for within the contract.

NOTE: If there is not enough time to process contract through the mail, fax or email the contract with the Dean’s signature to the vendor to sign return electronically. This ensures they are agreeing to the contract language and payment terms but is not yet a valid contract. The department will hold on to the “original contract” until the vendor arrives at which time the contract should be immediately signed by the contractor and then fully executed in Business Services as usual prior to the start of work. We will be looking for any final immigration documents that may have been required upon entry at this time as well.

Foreign Vendor Terms of Payment

It is always preferred for payments to be sent to contractors through the mail after their departure in order to allow processing time. However, we are aware that in some countries it is next to impossible for individuals to cash these checks. In this case, if the contractor is requesting payment prior to their departure, please see below.

If the contract is for compensation/honorarium only, it is possible to request the pull warrant from St. Paul. The contract needs to reflect this information on Page 3, section III.B.1. Also, enter this information in header page 2 of the purchase order under instructions to vendor as well as entering this information in the PO’s memo field. We must have two weeks lead time in order to receive the check back from St. Paul prior to the contractor’s departure. Provided that all required forms and immigration documents have been submitted and approved along with a signed additional authorization form from the inviting department, the check may be presented to the contractor after their duties are completed and prior to U.S. departure.

If expenses are involved a pull warrant may be possible prior to departure provided that all required forms and immigration documents have been submitted and approved along with an itemized invoice and corresponding original itemized expense receipts, all showing a zero balance due. Again, we must have two weeks lead time in order to receive the check back from St. Paul prior to the contractor’s departure.